Effects of relationship marketing on customer retention in the Kenyan banking sector
Oduor, Euphemia Shirley
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Over the past years a major shift has occurred in the way marketers approach their customers. Researchers assert a paradigm shift from the traditional marketing concept based on transactions to relationship marketing concept based on retaining customers on long term. Today's world is one where customers have a lot of options of product vendors, which makes for a very picky customer. This means that customers have an increasing rate of expectation and a decreasing level of tolerance. These and other major factors like intense competition, undifferentiated products have resulted in the need for relationship marketing. This study sought to establish the extent to which relationship marketing has been adopted by Kenyan commercial banks. The general objective of the study was to investigate the relationship marketing strategies adopted by various banks and their effects to customer retention; out if Kenyan banks have adopted relationship marketing strategies, their benefits and challenges experienced. The literature reviewed highlights the development and shift from transactional marketing concept to relationship marketing concept. A conceptual framework showing the relationship between the relationship marketing strategies as independent variables and customer retention is then derived. The study had a population of 46 commercial banks as listed by the Central Bank of Kenya as at December 2006. The sampling frame grouped banks according to total asset base with 12 being large, 20 medium and 14 being small banks. Simple random sampling was used to the sample size of 50% from each group making it a sample size of 23 banks. From each selected bank 5 customers were picked randomly to constitute a sample size of 115. A descriptive survey was carried out with data collected using a questionnaire. The data was analyzed using the Statistical Package for Social Sciences (SPSS) for Windows version, and the findings presented using percentages in tables. The study found that banks have adapted and implemented various relationship marketing strategies, with customers not being aware of some of them. It also found that some strategies have a greater effect on customer retention than others. The study found that the banks faced several challenges in implementing these strategies. This includes increased marketing costs, changing customer needs and fraud among others. Despite these challenges banks listed several benefits that they get from practicing relationship marketing. This included increase in sales, strengthening partnership with their customers and enhancing company image among others. It is from these that in conclusion the study highlights a number of strategies that are effective from the customers' response such as customization of products to suit customer needs, customers ease in accessing their accounts and good customer care. From these the study makes recommendations to the banks like, investing more in creating awareness of their products to customers. Also create clear channels of communication with their customers so that customers are aware of their services and even improve on their services. Customers on the other hand are advised to make sure they orient themselves with all the services that are offered by their banks. This will eliminate wasteful marketing practices on the banks part and maximum, benefits for both the banks and the customers.